Even though there has been an unusual silence from pollsters, who should be as busy as bees with so close to end-March municipal elections, AKP administration must be feeling the heat in the big cities in must keep, because pork-barreling is stepped up. First, led by Turkish Football Association and state-owned lender Ziraat Bank, Turkish banks launched a campaign to bail out heavily indebted 4 major football clubs, which would require restructuring debt worth ca $2.8 bn. On Tuesday, addressing his parliamentary caucus, President Erdogan heralded new “good tidings” which has become the catch phrase for economic measures to please the electorate.
Turkey’s Ziraat to Help Citizens Pay Off Their Credit Card Debts
Turkey’s biggest state-run bank will extend cheap loans to citizens struggling to pay off their credit-card debts, in a populist move designed to boost the economy before local elections in March, wrote Ms. Asli Kandemir of Bloomberg.com.
Ziraat Bank said in a statement it will offer loans for up to two years with a 1.1 percent interest rate per month, less than half the cost of the retail loan rate on its website. Up to five years, the rate is 1.2 percent per month.
Retail credit card debt in Turkey stood at 103 billion liras ($19 billion) at the end of November, around 4 percent of all loans in the country, according to the banking regulator. Credit card debt in danger of defaulting amounted to 6.5 billion liras.
The government is trying to boost a slowing economy through incentives, tax cuts and by helping to ease payment conditions on debt, after a plunge in the lira and a consequent spike in borrowing costs proved nearly as damaging as a failed coup attempt two years ago.
Turkish banks have already restructured around $20 billion of debt after the lira became one of the worst-performing major currencies last year, hurting firms’ ability to repay foreign-currency loans.
More populism in the pipeline
Erdogan also announced that the state will assume electricity bills up to TL80 per month for 2.5 million poor households. Hours later, economy czar Mr. Berat Albayrak’s Treasury Ministry bragged that another state-bank, Halkbank will open a credit line of TL22 bn (ca $4bn) to finance working capital and capex needs of small businesses. Finally, subsidies for social security contributions of large business employing more than 500 employees have been raised to 5% from 3% previously.
Also yesterday, the Treasury announced 2018 cash deficit as TL70.4 bn, a TL10 bn increase vs FS2017. Thus, the cash deficit declined in real terms, however the reduction in deficits was largely achieved by one-off revenues from multiple amnesties. It is not clear how the “good tidings” will be paid while preserving Albayrak’s promise of keeping FY2019 deficit below 2% of GDP.